Hope for double-digit revenue run rate by Q4FY17: Just Dial

He expects margin will be under pressure for the next few quarters as marketing and advertising spends will have to be undertaken but says there is nothing to be worried about.

The company currently has Rs 860 crore cash on books but does not have any inorganic plans with cash right now.Below is the verbatim transcript of Ramkumar Krishnamachari’s interview to Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Sonia: The revenue growth has slowed down to just single digit, just a 6 percent growth this time. What was the reason for that and what is the outlook? A: Unfortunately we are paying the price for not expanding or not executing on the sales side for the past two years. We have started executing on that but that will take couple of more quarters to see the results. So, whatever actions that we have taken on the sales front that will yield us results in FY18. So, unfortunately we are currently impacted by what we have not done in the last couple of years. It is something which probably we as management should have executed better on the sales side. We did not and that is what we are seeing right now; let us be honest about it. Latha: Are you saying that the efforts taken will only yield results in FY18 so should FY17 be similar to the first quarter; I mean it will be a single digit growth year? A: I am hopeful that whatever actions that we have taken should start seeing results in Q3, Q4 onwards. So, you would get into a run rate of double digit growth from Q3, Q4 onwards, that is our belief and the full impact of that should come in FY18. Sonia: You had in the last quarter spoken about adding a sales force to revive revenues, what was the sales force addition in the quarter gone by? A: We added about 600 odd sales people during the quarter. Latha: How many sales people will you look to add in the current year? A: We are committed to hiring as I said 2,000-2,500 total for FY17 and we are well on track for that. Sonia: The problem is how much your margins are getting crunched down. It is now at a multi-quarter low of 16 percent, is this a new normal, will margins be in this range going forward? A: As you see, we are expanding; we are continuing to invest on the product side so with these two initiatives margins are going to be under pressure at least for the next few quarters. Now, with advertising that is going to start pretty soon, sometime in September, that will add to the pressure on margin. We believe these are necessary investments that we have to make over the next few quarters. So, we are not that much worried about margin compressing in the short-term. Latha: Can you quantify the pressure on the margins? A: Very difficult for me to quantify the number or a range at this point. We are in 18-20 percent at this point and once advertising starts that will add further pressure on the margin. So margins are going to be compressed for FY17, certainly. Sonia: You are saying that margins can be even lower than what we have seen in Q1; that is lower than 16 percent? A: Once we start advertising that will impact the margins. Latha: Let us jus move to cash on the books, how much is it? A: We have about Rs 860 crore.Sonia: What makes you confident that the lagged efforts taken will revive growth considering that competition has only intensified? Should we really expect growth to bounce back in FY17?A: The market potential is huge. If you look at the number of paying customers to the number of overall database that we are looking at and lot of the markets even in the cities – Delhi, Mumbai, those are all hugely under penetrated as far as the JD platform is concerned. Definitely as more and more consumers are going online, platform like Just Dial is an answer to all the SMEs who wants to access the consumers going online. The overall market is also increasing, definitely it is not that either or that the consumer from an SME standpoint, they spend either with X or Y company. What we have seen is that more and more SMEs are open to spending on multiple platforms because for them it is at the end of the day lead generation. These platforms are lead generations for them and as long as they get the consumers, they are able to attract consumers, they are going to continue to spend. Just Dial, you have to remember that we are in world where more and more transactions are happening on the internet. Just Dial today is not yet known as a transaction platform, it is still known as a search platform. With the advertising campaign that we are going to start, Just Dial will be known, consumers will be aware and sensitised what all the transaction that they can do in the most convenient and efficient manner. Hence given the awareness that the ad campagin we intend to create that itself will bring back a lot of consumers who are transacting on to a platform and again that will translate into number of leads to our SMEs. So, our belief is that while we have not been very active because we are focusing on building the product and giving good consumer experience. So, hopefully once the ad campaign starts, the consumer awareness will increase and as a consequent our platform will be known as search and transaction platform. Latha: Let me just get back to the cash on books, you said Rs 860 crore then why is your ad campaign only a Rs 100 crore. Why can’t you step up considering you have so much cash? A: We are currently sticking to that number that will be spent over several quarters. So, at this point we have no reason to change the number. Sonia: You have discontinued giving revenue numbers for JD Omni, how much did it contribute this quarter? A: JD Omni contributed approximately about roughly Rs 5 crore of revenue. Latha: I thought you guided for a double digit growth in FY18, right, does that mean 10-20 percent, does it mean 20 percent plus like you enjoyed in the past?A: Right now I don’t want to put in a number there at this stage but we are confident that perhaps in one or two quarters, I will have more clarity but we are confident that it will be in double digits.